Tracking the Net Zero Banking Alliance
Tracking NZBA bank commitments
BankTrack monitors whether individual NZBA member banks deliver on their stated commitments as part of the NZBA. Go to the 'policy analysis' section for more details per bank.
The Net Zero Banking Alliance (NZBA), founded in April 2021, brings together a global group of banks, currently representing about 40% of global banking assets, which have committed to bringing down the emissions from their lending and investment portfolios to ‘net-zero’ by 2050. Banks that sign up to the NZBA commit the following:
Transition the operational and attributable GHG emissions from their lending and investment portfolios to align with pathways to net-zero by 2050 or sooner;
Within 18 months of joining, set 2030 targets (or sooner) and a 2050 target, with intermediary targets to be set every 5 years from 2030 onwards;
Banks’ first 2030 targets will focus on priority sectors where the bank can have the most significant impact, ie. the most GHG-intensive sectors within their portfolios, with further sector targets to be set within 36 months.
Annually publish absolute emissions and emissions intensity in line with best practice and within a year of setting targets, disclose progress against a board-level reviewed transition strategy setting out proposed actions and climate-related sectoral policies.
Take a robust approach to the role of offsets in transition plans.
Just how signatory banks must meet these commitments is further elaborated in the Guidelines for Climate Target Setting for Banks and the Frequently Asked Questions document.
The NZBA is convened by the UN Environment Programme Finance Initiative and acts as a coordination hub for the climate-focused element of the Principles for Responsible Banking.
The NZBA is part of a bigger alliance called the Glasgow Financial Alliance on Net Zero (GFANZ). Launched in April 2021 by UN Special Envoy on Climate Action and Finance Mark Carney, GFANZ consists of seven Alliances, each dedicated to a specific part of the financial sector, namely the Net Zero Asset Manager initiative (NZAM), Net Zero Asset Owners Alliance (NZAOA), Net Zero Insurance Alliance (NZIA), Paris Aligned Asset Owners (PAAO), Net Zero Financial Service Providers Alliance (NZFSPA), Net Zero Investment Consultants Initiative (NZICI) and the Net Zero Banking Alliance (NZBA).
GFANZ, in its own words, seeks to “expand the number of net zero-committed financial institutions and to establish a forum for addressing sector-wide challenges associated with the net-zero transition, helping to ensure high levels of ambition are met with credible action.”
Race to Zero
GFANZ (and therefore all member alliances) is accredited to the UN Race to Zero (RtZ) campaign, a global UN-backed campaign that aims “to take rigorous and immediate action to halve global emissions by 2030 and deliver a healthier, fairer zero carbon world in time”. The Race to Zero campaign mobilises a wide range of initiatives, including from regions, cities, companies, educational institutions, hospitals, financial institutions and other sectors.
In June 2022, The RtZ campaign launched a new set of criteria that all members must adhere to, including GFANZ, and, therefore, NZBA members. These criteria are ‘requirements for all individual members to meet, below which members cannot fall if they wish to join and remain in the campaign’. The so-called Starting Line criteria demand all RtZ members to ‘’pledge .. to reach (net) zero GHGs as soon as possible, and by 2050 at the latest, in line with the scientific consensus on the global effort needed to limit warming to 1.5C with no or limited overshoot, recognising that this requires phasing down and out all unabated fossil fuels as part of a global, just transition” (emphasis added).
The accompanying interpretation guide clarifies that ‘phasing down and out’ means that ‘each Race to Zero member shall phase out its development, financing, and facilitation of new unabated fossil fuel assets, including coal, in line with appropriate global, science-based scenarios’ (emphasis added).’ The starting line criteria further demand that members set interim targets, publish transition plans and progress reports, and pledge to halt deforestation and protect biodiversity. Further detail on the application of the RtZ starting line criteria is provided in the ‘Interpretation guide’.
The launch of the new RtZ criteria in June 2022 set in motion fierce internal debate within NZBA on how the Alliance links to Race to Zero, with several US banks threatening to leave the initiative. As a result, GFANZ’s second progress report, published in October 2022, and a subsequent statement of GFANZ, stated that its ‘’member alliances are encouraged, but not required, to partner with the Race to Zero‘’, with all alliances of GFANZ “independent initiatives subject only to their individual governance structures.” However, the progress report also states that these GFANZ alliances continue to be partners to the Race to Zero campaign, committing them to act according to their ‘’fair share’’ of the 50% cut in global CO2 emissions, in addition to the phase-out of fossil fuels.
Why is this important to track?
Since its launch, the Net Zero Banking Alliance has emerged as the central initiative claiming to align the banking sector with the 1.,5°C Paris climate goals. For most banks, ‘aligning with Paris’ means bringing down financed emissions to ‘net zero’ by 2050. But there are serious issues with this approach:
Net zero is not zero. The ‘net’ refers to an approach in which continued emissions from some ‘hard to abate’ sectors will need to be compensated through all sorts of offset schemes that are highly problematic for a range of reasons.
2050 is too far away. While it will take time to transition entire business sectors to a low/no carbon trajectory, the bulk of action to bring down emissions must be taken right now, in the next few years. As the NZBA allows an extremely generous time period of 18 months for initial target setting for ‘selected priority sectors’, with another 18 months for the rest of the portfolio, too many banks are ‘busy target setting’ when the climate emergency is requiring immediate, effective action
Net zero must mean ending finance for fossil fuels. The key decision for all NZBA banks to make now is to stop financing, directly and indirectly, the fossil fuel industry, or at a minimum all coal and the further expansion of oil and gas. No less than 44 of the 60 banks that BankTrack and partners have identified as ‘Fossil banks’ are NZBA members, illustrating that for banks, it is perfectly compatible to keep financing fossil fuels while being an NZBA bank. (Even the co-chairs of GFANZ, speaking in their personal capacity, think this is odd.)
By tracking the commitments and actions of banks, BankTrack aims to ensure that signing up to the NZBA means that a bank will address its fossil fuel financing, starting with an immediate end to all finance for fossil fuel expansion, and will speed up target-setting for all other high emissions sectors.
Tracking NZBA bank commitments
BankTrack monitors whether individual NZBA member banks deliver on their stated commitments as part of the NZBA. Click on the picture below for more details per bank.